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Morning NOTE

29 September 2022


The ZAR strengthened dramatically, gaining 2.3% after the BOE stepped in with more QE (Quantitave Easing) to stabilise UK bond markets.


  • The Rand benefitted on the back of the Bank of England attempting to stop the run on UK government bonds after markets reacted negatively to the new administration’s budget proposals.

    • UK yields sky rocketing with the 10Y Gilt (Gilt, is the market name for UK government Bonds) , breaking through the 4% level.
      • News broke of UK pension funds feeling the strain as the run, decimated bond portfolios and placed retirement savings at risk.
      • The BOE stepped in with QE ( i.e. bond buying in the longer end of the curve) to stop the rot. 
  • Markets rallied on the news with Stocks markets moving from negative to positive and the Dollar getting sold off.
    • Analysts, however could not believe what they were seeing and this morning, markets are once again on the back foot with bond yields rising.
      • The US 10YT 3.83%
      • The UK 10YT 4.01%
    • The UK govt and BOE widely seen as aggravating and already heightened inflation problem.
  • Earlier in the day both Fed president Bostic and Bullard had their say .
    • Atlanta Fed President Raphael Bostic said inflation is still too high and he backs raising rates by a further 1.25 percentage points by the end of this year. Bloomberg
    • St Louis Fed chief, James Bullard called for another 75 bps.
      • He believed the FED, if it stays the course could avoid a repeat of the disastrous 70’s, that resulted in sky high interest rates and a deep recession.
  • After gaining briefly Risk assets (like the ZAR ), are once again opening weaker this morning.
    • The BOE move seen as similar to the Bank of Japan, FX intervention last week. (i.e. of little use!).
    • The Eskom power cuts continues to weigh on the ZAR in the back ground as Eskom once again pushed out stage 4 until the weekend.
  • NB: The ZAR remains at risk due to rising global yields and domestic energy concerns.

Significant Market Data


·         11h30 :  SA PPI YOY 17.6% YOY VS 18% YOY PREVIOUS

·         14H00 : GERMAN INFLATION 9.8% YOY PREVIOUS 7.9% YOY

·         14H30 : US GDP GROWTH QoQ -0.6% EXPECTED VS -1.6% QOQ


·         11h00 : EUROZONE  INFLATION :   9.6% EXPECTED VS 9.1% PREVIOUS




  • Risk assets widely lower in Asian trading, leading us to believe the euphoria of the BOE has already died down.
    • The ZAR likely to track global risk sentiment and another rise in bond yield likely to be Dollar supportive at the expense of the ZAR.
    • In this environment it is hard to see any long lasting ZAR gains, and we encourage importers, with short term commitments (1-3months)
    • To exact cover and hedge FX payment exposures.
    • Earlier this morning, SA Private Sector Credit increased to 7.86% in August from 7.06 % in July of 2022. source: South African Reserve Bank
      • This likely to keep the SARB on the front foot to fight inflation and support the ZAR .
      • Indicating a healthy demand and access to credit as SA households battle a cost of living crises as well as Eskom load shedding.
  • This morning we opening at 17.9500 , which is smack bang in the middle of yesterday’s range. i.e. 18.2200-17.7900
    • This indicates a market, with high levels of uncertainty, and until more NEWS breaks, we expect a range bound session.

NB: The bias however remains for a weaker ZAR .

Expected Ranges

  • USDZAR :  Expect a range 17.8000-18.1800
    • Importers 17.9500-17.8000
    • Exporters 18.0000-18.1800
  • EURZAR :  Expect a range of 17.2900-17.5100
    • Importers 17.3600-17.2900
    • Exporters 17.4000-17.5100
  • GBPZAR :  Expect a range of 19.2700-19.5700
    • Importers 19.3700-19.2700
    • Exporters  19.4200-19.5700


  • USDZAR 17.9500
  • EURZAR 17.3600
  • GBPZAR 19.3700


  •  Eskom said stage four power cuts would continue until diesel stocks at two power stations had been fully replenished.
    • Adverse sea weather conditions are preventing a vessel to berth, which is set to offload diesel at Mossel Bay.
    • Earlier,  Eskom on Wednesday announced its load shedding schedule would continue until Saturday.
      • This following Sunday’s announcement that power cuts would be implemented until Thursday.
    • Stage 3 load shedding will continue to run from midnight until 4 pm on Thursday when stage 4 will then be implemented until midnight. IOL
  • Vodacom’s announced it is planning a pilot project with Eskom to boost its use of renewable energy and add power to the national grid
    • While this plan won’t solve load shedding it will alleviate the pressure on Eskom, says Vodacom Group CEO Shameel Joosub. Fin24
  • Recent data from Statistics South Africa shows a decrease in full-time employment and an increase in part-time employment year-on-year.
    • It also indicates that there’s been an increase in employment year-on-year, with 74,000 more jobs recorded in the second quarter of this year.
    • However, total employment was down by 119,000 compared to last year. EWN
  • Capitec aims to disrupt mobile market with data that doesn’t expire
    • And is sold at a single price per MB whether clients buy small or large amounts.
    • Currently data providers sell data the expire after 30 days, something that South Africans have long complained about.
    • In addition the tiered pricing has also long been seen as prejudicing low income earners who cant afford larger bundles.
    • Capitec, aims to break into the market by eliminating both “problems” – Money web


  • In regular trading on Wednesday, the Dow climbed 1.88%, the S&P 500 jumped 1.97% and the tech-heavy Nasdaq rallied 2.05%.
    • All three benchmarks recovering from early session lows, after the Bank of England said it would purchase bonds (QE) in a bid to stabilize its financial markets.
    • The news sending global bond yields lower which in turn supported a broad risk rally.
    • All S&P sectors advanced, led by energy, communication services and consumer discretionary.
    • This morning however,  futures eased on Thursday after the major averages rallied sharply in the last regular session. Reuters


  • The US 10-year Treasury note yield retreated to 3.83% on Wednesday, after briefly topping the 4% mark early in the session, a level not seen since April of 2010.
  • The Bank of England’s announcement that it will carry out temporary purchases of long-dated UK government bonds in order to restore orderly market conditions offered investors some support.
  • Still, Treasury yields remain elevated as traders brace for further aggressive monetary policy tightening by the Federal Reserve.
  • A number of hawkish Fed speeches confirmed the central bank commitment to bring inflation back to its 2% target. Source : US treasury


  • The Dow gained 548 to 29,683
  • The SP500 added 71 to 3,719     
  • The Nasdaq added 222 to 11,051


The Bank of England

  • The BOE said it will carry out temporary purchases of long-dated government bonds from 28 September in order to restore orderly market conditions.
  • The Bank also postponed the start of its gilt sale programme, due to begin next week, because of the market conditions.
  • The 10-year note topped 4.5% for the first time since November 2008, as panic selling intensified after the government announced sweeping tax cuts last Friday.
  • This week, Kwasi Kwarteng showed optimism in its economic strategy, saying he remains committed to bringing debt under control and reiterated that his £45 bn of tax cuts would boost growth.
  • Meanwhile, BoE Huw Pill suggested the central bank may hike rates significantly at the next policy meeting in response to finance minister Kwasi Kwarteng’s huge tax cuts. Reuters

Asian markets all higher as shares rise across the region.

  • Stocks in Asia followed Wall Street higher on Thursday, as US Treasury yields fell from 15-year highs while the Bank of England launched a bond-buying program to restore market conditions.
    • In Japan, the Nikkei gained 0.95% to close at 26,422, rebounding from three-month lows and tracking a broad rally on Wall Street.
      • Traders citing the Bank of England’s announcement to conduct bond-buying operations sent global bond yields lower and spurred a risk rally.
      • The surprise BoE move aimed at stabilizing its financial markets sent the benchmark 10-year US yield 23 basis points lower to 3.733%, its biggest one-day drop since 2020.

In Australia, the ASX 200 jumped 1.44% to close at 6,555 also rising from three-month lows and tracking overnight gains on Wall Street.

  • Energy stocks led the charge as oil prices jumped nearly 5% overnight and nearly all other sectors gained including technology, healthcare and financial stocks. Bloomberg
  • The moves on the back of  the Bank of England launching a £65bn bond-buying program to stabilize its financial markets.
    • The move sending global bond yields lower which in turn supported a broad risk rally.
  • With energy and mining stocks leading the charge on firmer commodities prices.

The US dollar fell below 114, but rebounded in early trading in Asia.

  • On Wednesday, the Buck tumbling more than 1%, after heading back towards its highest levels in two decades .
  • The surprise impact of the Bank of England’s bond buying operation faded amid concerns over Britain’s fiscal plan and economic challenges.
  • Throughout the week Fed policymakers indicated the central bank’s determination to do what is necessary to bring down inflation.
    • Also, recall , White House National Economic Council Director Brian Deese rejected the idea of another 1985-type currency accord to weaken the dollar.
    • He cited the dollar’s value reflected  the US economy’s relative strength and was a significant factor driving the dollar higher. Fx news
  • Crude oil jumped to $82/bl as traders weighed persistent concerns over a demand-sapping global economic slowdown against a tightening supply outlook.
    • The US oil benchmark is set to decline for the fourth straight month.
    • In addition, it is on track for its first quarterly loss in more than two years as markets were worried that aggressive interest rate hikes could hit the global economy and energy demand.
    • Supporting  prices further after a gain of about 7% remains the energy standoff between the European Union and Russia.
    • The Russians threatening to disrupt supply further. Gulf energy news
  • Gold rallied towards $1,650 /oz after a sharp rebound in the previous session.
    • Bullion continues to be dragged down by haven demand for the dollar .
    • Traders citing a preference for the Dollar on the back of  concerns that tightening monetary conditions would tilt the global economy into a recession.
    • The metal is on track to decline for the sixth straight month as the US Federal Reserve led a global wave of interest rate hikes to curb surging inflation.
    • BUT, gold prices jumped nearly 2% on Wednesday after the BOE said it would purchase bonds in a bid to stabilize its financial markets.
      • The move sending the dollar and global bond yields lower while pushing the metal higher. Kitco metals

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